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Intellectual property infringement complaints in U.S. federal courts dropped in 2016
from a year ago, driven by declines in patent and copyright infringement claims, Bloomberg
Law data shows.

Patent infringement filings totaled 4,624 complaints in 2016. That represented a 22
percent drop from a year earlier, as recent case law and regulation have made it tougher
for patent licensing companies, also called non-practicing entities (NPEs), to mount
and win legal fights. Patent infringement complaint filings rose steadily starting
in 2010 and peaked in 2013, when 6,314 cases were filed in federal courts.

Copyright complaints fell 25 percent to 3,811 in 2016 from the previous year. Volumes
of copyright complaints continued to fluctuate, partly due to irregular activity from
adult film maker Malibu Media LLC, which has filed more than 5,000 lawsuits since
2012. Malibu still files more copyright infringement lawsuits than any other company
in the country.

In 2017, numbers of IP infringement complaints may start to stabilize. “Looking at
the pending cases and legislative environment, there is nothing that signals either
a significant uptick or a drop in IP cases across the board” in the year ahead, Matt
Larson, a litigation analyst at Bloomberg Intelligence, said.

It is possible, however, that a “legal decision or presidential ruling” could come
along in 2017 that “shakes up the landscape,” Larson said.

Tough Environment for Patent Holders

Last year saw a return to the downward trend in patent infringement filings that started
in 2014, with 2016 complaint volumes falling below 2014 levels. The surge seen in
filings in 2015 appears to be an exception driven by patent owners rushing to make
claims before stricter pleadings rules went into effect in December of that year.

The new rules require patent owners to provide sufficient factual detail to show that
a claim is “plausible"—instead of the bare minimum complaint that could be filed before
.

Those rulings, and the ability to challenge patents at the Patent Trial and Appeal
Board as created by the America Invents Act of 2011, continue to figure in patent
holders’ decisions on whether they should litigate. The PTAB process gives someone
accused of infringing a patent another route, in addition to court, for questioning
that patent’s validity.

“Supreme Court decisions have been going against patent holders very consistently,
and financing for NPEs is getting tougher,” Kent Richardson, an attorney at Richardson
Oliver Law Group, said. “The risk of having to pay the other side’s legal costs has
gone up substantially.”

Moreover, companies have been defensively buying patents to protect against entities
that seek to earn revenue by aquiring patents and asserting them against other companies,
he added.

The U.S. District Court for the Eastern District of Texas remained the busiest patent
court in 2016 with 1,684 cases filed. However, this year the Supreme Court will hear
TC Heartland LLC v. Kraft Food Brands Group LLC, a case that could dramatically limit where patent holders can bring infringement
suits. Current case law lets plaintiffs file complaints in districts where defendants
sell their products. That has led to a glut of cases filed in courts such as the Eastern
District of Texas that are considered friendly towards patent holders.

In
TC Heartland, the high court will determine whether patent owners may sue only in districts where
defendants do business or are incorporated, or where they have a regular and established
place of business and have committed acts of infringement. The decision could reduce
the dominance of the federal court in the Eastern District of Texas.

Companies that filed the highest numbers of patent infringement suits in 2016 included
Shipping and Transit LLC and Uniloc USA Inc., according to Bloomberg Law data. Both
companies make money by asserting and licensing patents.

Florida-based Shipping and Transit filed over 100 lawsuits, many in the online shopping
sector over package tracking. Uniloc filed around 90 lawsuits, including complaints
against Silicon Valley firms Apple Inc. and Facebook Inc. related to Voice over internet
Protocol technology.

Copyright Complaints Fall

The biggest shift in copyright litigation remains the slowdown in Malibu Media’s lawsuit
campaign. Complaints from the adult film company that individuals are downloading
and distributing their films over the internet dropped by more than 60 percent in
2016 to about 750.

The sudden drop follows year after year of steady increases. Malibu Media changed
law firms in 2016 and sued its former attorney in federal court over its share of
settlements. The case was dismissed in September.

Hollywood studio Millennium Films ramped up litigation in 2016 against online piracy
of its movies. The company filed 229 complaints related to downloads of its film “London
has Fallen,” the sequel to the blockbuster “Olympus has Fallen” starring Morgan Freeman,
Gerard Butler and Aaron Eckhart. Millennium Films also had 68 complaints for the movie
“Criminal,”
and 82 for “Mechanic: Resurrection.”

Based on jurisdiction, Millennium typically files complaints against multiple unknown
defendants
("John Does") in the same complaint. By contrast, Malibu Media brings separate complaints
against each individual defendant.

Trademark Fights Move Up

Filings of trademark complaints rose 3 percent in 2016 to 3,186. Trademark lawsuit
volumes were relatively stable through the year, with counterfeit enforcement making
up the bulk of docket activity.

Roor, the German maker of water pipes for smoking, and its U.S. licensee Sream Inc.
were among the top filers of trademark suits in 2016. The companies stepped up their
campaign against some smoke shops and other retailers they claim have been selling
counterfeit goods with the Roor logo. Complaints filed by Roor and Sream increased
about five-fold to more than 180 cases in 2016 from 2015. Sream and Roor filed most
of their complaints in the Central District of California and the Southern District
of Florida.

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